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BUDGETARY CONTROL AND RESPONSIBILITY ACCOUNTING true false

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Question;TRUE-FALSE STATEMENTS;1. Budget reports comparing actual results;with planned objectives should be prepared only once a year.;2. If actual results are different from;planned results, the difference must always be investigated by management to;achieve effective budgetary control.;3. Certain budget reports are prepared;monthly, whereas others are prepared more frequently depending on the;activities being monitored.;4. The master budget is not used in the;budgetary control process.;5. A master budget is most useful in;evaluating a manager's performance in controlling costs.;6. A;static budget is one that is geared to one level of activity.;7. A static budget is changed only when actual;activity is different from the level of activity expected.;8. A static budget is most useful for;evaluating a manager's performance in controlling variable costs.;9. A flexible budget can be prepared for each;of the types of budgets included in the master budget.;10. A flexible budget is a series of static;budgets at different levels of activities.;11. Flexible budgeting relies on the assumption;that unit variable costs will remain constant within the relevant range of;activity.;12. Total budgeted fixed costs appearing on a;flexible budget will be the same amount as total fixed costs on the master;budget.;13. A flexible budget is prepared before the;master budget.;14. The activity index used in preparing a;flexible budget should not influence the variable costs that are being;budgeted.;15. A formula used in developing a flexible;budget is: Total budgeted cost = fixed;cost + (total variable cost per unit? activity level).;16. Flexible budgets are widely used in;production and service departments.;7. A flexible budget report will show both;actual and budget cost based on the actual activity level achieved.;18. Management;by exception means that management will investigate areas where actual results;differ from planned results if the items are material and controllable.;19. Policies regarding when a difference;between actual and planned results should be investigated are generally more;restrictive for noncontrollable items than for controllable items.;\20. A distinction should be made between;controllable and noncontrollable costs when reporting information under;responsibility accounting.;21. Cost centers, profit centers, and;investment centers can all be classified as responsibility centers.;22. More costs become controllable as one moves;down to each lower level of managerial responsibility.;23. In a responsibility accounting reporting;system, as one moves up each level of responsibility in an organization, the;responsibility reports become more summarized and show less detailed;information.;24. A cost center incurs costs and generates;revenues and cost center managers are evaluated on the profitability of their;centers.;25. The terms "direct fixed costs;and "indirect fixed costs" are synonymous with "traceable;costs" and "common costs," respectively.;26. Controllable margin is subtracted from;controllable fixed costs to get net income for a profit center.;27. The denominator in the formula for;calculating the return on investment includes operating and nonoperating;assets.;28. The formula for computing return on;investment is controllable margin divided by average operating assets.;a29. When;evaluating residual income, the calculation tells management what percentage;return was generated by the particular division being evaluated.;a30. Residual income;generates a dollar amount which represents the increase in value to the company;beyond the cost necessary to pay for the financing of assets.;31. Budget reports provide;the feedback needed by management to see whether actual operations are on;course.;32. A static budget is;an effective means to evaluate a manager's ability to control costs, regardless;of the actual activity level.;33. The flexible budget;report evaluates a manager's performance in two areas: (1) production and (2) costs.;34. The terms;controllable costs and noncontrollable costs are synonymous with variable costs;and fixed costs, respectively.;35. Most direct fixed;costs are not controllable by the profit center manager.;36. The manager of an;investment center can improve ROI by reducing average operating assets.;a37. Residual income and ROI are used as performance evaluation methods;for profit center performance

 

Paper#41766 | Written in 18-Jul-2015

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